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Amundi/Lyxor: whale seeks scale effect from ETF tiddler

Money managers have their work cut out in the era of low fees. Their bankers are at full stretch too. Amundi’s advisers had to muster all their eloquence to justify the €825m purchase price for Lyxor announced on Wednesday.

Fund management is a scale game. Paris-based Amundi, which manages €1.7tn, needs to hang on to the title of Europe’s largest asset manager. Vendor Société Générale has done nicely as a result.

Lyxor, with €124bn in client money, ticks the boxes that a big diversified asset manager looks for. Top of that list are its exchange traded assets. These propel Amundi to number two in the segment in Europe, ahead of DWS and behind BlackRock.

Fast growing passive assets will slot neatly into Amundi’s already efficient operations. Lyxor’s funds can be sold to customers across the network of bank branches and joint ventures of Amundi’s owner Crédit Agricole. The deal brings scale to an area where Amundi needs it most.

Payback depends on punchy assumptions. Lyxor’s 75 per cent cost-to-income ratio must be brought closer to Amundi’s 50 per cent. Integration needs to yield annual cost savings of €60m after three years. That equates to 35 per cent of Lyxor’s cost base, in line with the average for recent deals in the sector including Amundi’s acquisition of Sabadell Asset Management last year.

If margins rise as hoped, the purchase price of 21 times Lyxor’s expected net income this year falls to a more reasonable 10 times. That would be roughly where Amundi shares are trading in relation to 2023 expected earnings. 

Expected revenue synergies of €30m a year flatter the deal. Lex is always sceptical of these. The injection of ETFs and their ilk will supposedly energise Amundi’s sales networks. Equally, those groovy new index trackers might just encourage switching and cannibalisation of new sales.

Huge state support for markets temporarily eased pressure on asset managers. As this attenuates, expect margin pressure and consolidation to intensify. To survive, participants will have to be either very specialised or very big. Amundi has a head start.

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